Question

select the correct answer.

justin made a stock purchase to help increase his college fund. what might justin expect from his investment?

no loss of his original investment
small interest rate payments
potential for high growth and dividend payments
a maturity date of five years

Explanation:

Analyze the characteristics of stock investments

Stocks represent ownership in a corporation. Unlike savings accounts or government bonds, stocks do not guarantee principal preservation (there is a risk of losing the original investment) and do not pay fixed interest rates or have a maturity date. Instead, stock investors look for capital appreciation (growth) and potential dividend payments distributed from the company's earnings.

Evaluate the given options

• "no loss of his original investment": Incorrect, because stock investing carries market risk, and the value can decrease below the purchase price.
• "small interest rate payments": Incorrect, because stocks pay dividends, not interest. Interest is typically paid by bonds or savings accounts.
• "potential for high growth and dividend payments": Correct, as these are the primary financial returns expected from stock investments.
• "a maturity date of five years": Incorrect, because stocks do not have maturity dates; they can be held indefinitely. Bonds have maturity dates.

Answer:

• no loss of his original investment
• small interest rate payments
• potential for high growth and dividend payments (Correct answer)
• a maturity date of five years